Do I need business insurance for my limited company?

The likelihood of requiring some kind of business insurance for your limited company is high, but it depends on a number of factors, including your profession, the type of business activities you will be involved in, your choice of business premises, and whether or not you will be employing people to work for you. The most common types of business insurance policies we will discuss in this post are:

• Professional indemnity
• Public liability
• Buildings and contents
• Employer’s liability

Professional indemnity insurance

You will need to take out professional indemnity insurance if you provide professional services or advice to other people or businesses. Many professions are legally required to have PI cover, for others it is optional but strongly advised. The types of professions that typically take out this type of insurance include: accountants and financial advisors, solicitors, engineers and architects, management and business consultants, graphic designers, interior designers and IT consultants.

Regardless of how well you carry out your work, professional indemnity insurance will protect you even against the cost of defending yourself against unsuccessful claims. If any claims are won by a client, your insurance will cover the associated legal fees and the compensation you are required to pay. It is therefore important to base the level of cover on the types of services you provide and the potential cost of damages you would have to pay if things go awry.

Always make sure that your client contracts specify the level of cover required before agreeing to the work. The majority of insurers offer professional indemnity cover between £5,000 – £5,000,000, so you will be able to tailor the policy to suit your specific needs and professional requirements.

Public liability insurance

Public liability insurance will be required if you provide services or products that could potentially damage other people’s property or cause death or injury to a person, whether on or off your business premises. It could be something as simple as spilling coffee on someone’s laptop at a trade fair, or a courier slipping and injuring themselves in your home office, to more serious claims like falling debris from a construction site causing serious injury to a member of the public. The possibilities are endless, so this is an essential consideration for almost all business owners.

The limit of cover required will depend on the type of work you do but, again, you need to think about what could potentially go wrong, the associated legal costs of defending yourself against claims, and how much you could have to pay in compensation. Most insurers will offer cover between £50,000 – £5,000,000.

Please note: a public liability policy will not cover injury to employees or damage to their own property or possessions. If you have employees, you are legally required to take out employer’s liability insurance, which will cover any claims for injury or damage caused by your business.

Buildings and contents insurance 

Whether you work from a home office, on clients’ premises or from your own non-residential business premises, property insurance will most likely be required to cover the cost of repairing or replacing damaged, lost or stolen property that you require to carry out your work.

If you own dedicated business premises, you will need adequate buildings and contents insurance to protect this property. That much is obvious. If you work from home and store your stock, supplies and equipment there, you should ensure all business-related goods are covered by your home contents insurance policy. Standard policies generally do not cover business items, so you must speak to your insurer and amend your policy to include these items.

 If you rent your business premises, your landlord is responsible for buildings insurance but not contents insurance. You are responsible for taking out adequate cover to protect your own personal goods and those belonging to your company.

Employer’s liability insurance

Employer’s liability insurance is compulsory if you employ people through your company, with the exception of yourself, your family members and workers based abroad. However, if any of your overseas workers spend more than 14 consecutive days in the UK, or more than 7 days on an offshore installation, you are legally required to have employer’s liability insurance.

This type of insurance will protect you in the event of an employee being injured or becoming ill as a result of their work, whether caused on or off site. An ‘employee’ includes full-time and part-time workers, temporary and seasonal workers, contractors, apprentices and volunteers.

Your insurance policy must be from an authorised insurer and provide a minimum of £5 million cover, but most insurers provide automatic cover of £10 million. If you fail to insure your business properly, you can be fined up to £2,500/day, so don’t let this one slide. It is also important to display your EL certificate on your premises and make it available to inspectors upon request, otherwise you may be fined £1,000/day.

About Rachel Craig

Rachel Craig is the senior content writer and editor for Rapid Formations Limited, the UK’s #1 company formation agency. An expert in her field, Rachel provides in-depth guidance and advice on UK company registration, corporate compliance and starting a new business.